1 | PwC Kazakhstan результаты опроса по макроэкономики 2К 2020 Quarterly Macroeconomic Survey Expert Survey Results Q2 2020 Presentation by Lorem Ipsum October 2018 2 | PwC Kazakhstan результаты опроса по макроэкономики 2К 2020 Introduction Stability and predictability of macroeconomic environment in which the business operates is fundamental to its success. Against the backdrop of the COVID-19 pandemic outbreak being a qualitatively new factor that humanity has encountered, increases the need for quality expert assessments, which can reflect the effects of constantly changing phenomena in the markets, thereby making it possible to make decisions when accurate calculations are not available. Natalya Lim Partner, In this regard, PwC Kazakhstan conducts quarterly survey on Advisory services macroeconomic indicators among leading reputable economists PwC Kazakhstan (including economists with work experience in central banks) and professors of macroeconomics, representatives of international development institutions, commercial banks, brokerage companies to obtain balanced and comprehensive view of the most significant for Kazakhstan economy factors. This survey is focused on the forecast of macroeconomic indicators in horizons from 1 year to 5 years, including: ● BRENT oil price ● USD/KZT, USD/RUB, RUB/KZT exchange rates ● Inflation in Kazakhstan ● National Bank of Kazakhstan base rate “ We understand that disclosing the identity of experts can affect the quality of responses. This survey was conducted confidentially to maximize objectivity of opinions. The names and positions of the respondents were disclosed only upon formal permission of the respondent. 3 | PwC Kazakhstan результаты опроса по макроэкономики 2К 2020 Contents Survey methodology page 4 Key findings page 6 page 7 01 COVID-19: Kazakhstan economy recovery scenarios 02 BRENT oil price forecasts page 12 03 Exchange rate forecasts page 16 04 NBRK inflation and base rate forecasts page 21 Acknowledgments стр. 28 Contacts стр. 29 4 | PwC Kazakhstan результаты опроса по макроэкономики 2К 2020 Overview and survey objectives The survey received responses from over The survey results are forecasts for key 20 experts, about half of the respondents macroeconomic indicators, which often provided detailed comments when form the basis of financial and economic answering questions that formed the basis models of companies (including of the qualitative analysis of this survey. commercial banks and investors). These forecasts are often used by economic We involved experts from various fields to departments to compare and calibrate the obtain the most complete and balanced initial values included in their calculations. picture. Our respondents include leading reputable economists, professors of Such regular comparisons can improve macroeconomics, representatives of quality of the models used and contribute international financial institutions, to a more flexible response to dynamic commercial banks, and brokerage changes in the economic environment. In companies. our practice, we have encountered situations when the calculation models, Experts were asked to answer questions despite the level of detail and elaboration, regarding the influence of exogenous did not provide business with necessary factors, including COVID-19, on the insights to make decisions that could economy of Kazakhstan. In addition, preserve the company's capital. respondents were interviewed regarding the forecasted expectations for the cost of With this survey, we hope to provide BRENT crude oil, USD/KZT, USD/RUB, readers with a structured, systematic and RUB/KZT exchange rates, inflation in regularly updated data block on Kazakhstan and base rate of the National macroeconomic indicators, based on the Bank of Kazakhstan for horizons from 1 best expert assessments in the market. year to 5 years. This horizon was selected The survey was conducted at the end of to obtain forecasts for the medium term. June 2020. 5 || PwCPwC KazakhstanKazakhstan Macroeconomicрезультаты опроса Survey по макроэкономикиResults 2Q 2020 2К 2020 Approach to analysis of survey results An analysis of respondents' answers to many For these purposes, PwC Kazakhstan questions revealed rather significant asked respondents to provide their differences of opinion, which is expected in opinions in minimum and maximum ranges studies where experts represent various fields for questions where it was appropriate (oil (economists, traders, scientists, bankers) and, prices, exchange rates, inflation) and used accordingly, have access to different sources several approaches to results analysis. of information. In addition to using standard statistics of Consolidation of opinions covering large part central tendency for all answers, we also of professional participants in the financial took the top 30% in the answers within the market, as well as scientific experts and maximum range responses and the bottom leading economists of Kazakhstan, gives us 30% within the minimum range of the opportunity to predict several scenarios for responses to identify the most optimistic the development of Kazakhstan’s economy. and most pessimistic scenarios. Step 1 Step 2 Step 3 Respondent response Maximum Minimum values respondent respondent values values Upper Determination 30% of central Qualitative analysis tendency Lower of respondents' 30% comments Scenario 1 Scenario 2 Potential values range of macroeconomic indicators 6 || PwCPwC KazakhstanKazakhstan Macroeconomicрезультаты опроса Survey по макроэкономикиResults 2Q 2020 2К 2020 Key findings Post-COVID-19 economic recovery Oil prices Exchange rates Inflation (CPI) NBRK base rate 83% 96% 39% 52% 87% of respondents expect of respondents do not of respondents expect the of respondents on of respondents expect the U-shaped recovery expect oil prices above $50 lowest point of tenge in the average expect inflation NBRK base rate to be scenario per barrel during the year range of 450-500 tenge per above 7% during the year less than or equal to 9% US dollar during the year Page 7 Page 12 Page 16 Page 22 Page 26 7 | PwC Kazakhstan результаты опроса по макроэкономики 2К 2020 01 COVID-19: Kazakhstan economy recovery scenarios 8 | PwC Kazakhstan результаты опроса по макроэкономики 2К 2020 Economic recovery scenarios What trajectory do you think will follow the economy of Kazakhstan in the next two years after COVID-19? Given the nature of the shock Percentage of respondents expecting scenario development U, V, L, W Economic recession (risk of other pandemics, revaluation of values), I expect “ permanently slower, and better quality, growth, globally in Kazakhstan. I picked "U" as 83% 0% the closest to my view U-scenario (slightly longer period of low economic activity, but with V-scenario (fast drop and equally fast recovery) subsequent recovery) Sabit Khakimzhanov % % Director, Financial Stability and Risks 13 4 Department, NBRK L-scenario (sharp collapse and subsequent depression, which W-scenario (sharp collapse, rapid recovery, followed by a will prevent the economy from recovering to pre-crisis levels) new recession, and recovery again) 9 || PwCPwC KazakhstanKazakhstan Macroeconomicрезультаты опроса Survey по макроэкономикиResults 2Q 2020 2К 2020 Economic growth is entirely based on the behavior of households and firms. Even in the case of an efficient vaccine or cure for coronavirus, some people with low risk tolerance will “ need time to adapt to new conditions. - Baurzhan Tulepov 10 || PwCPwC KazakhstanKazakhstan Macroeconomicрезультаты опроса Survey по макроэкономикиResults 2Q 2020 2К 2020 10 The worldwide spread of COVID-19 pandemic 83% of respondents surveyed suggest that the and the restrictive measures taken to combat it, recovery of Kazakhstan’s economy will have along with decrease in business activity in services and manufacturing industries and U-shaped recovery path, and the process of reduction in new orders in foreign and domestic overcoming the crisis may take protracted nature While there is no vaccine, the markets, have a significant negative impact on for many reasons. First of all, due to the fact that economic activity worldwide. COVID impact on the the shock seriously impacted business activity and business, especially SMEs, it will take a long economy cannot be time to restore and adapt to new conditions and “ Basic scenario of economic recovery search for new opportunities. The consensus is suspended. This means that According to experts responding to survey, a high that until the creation of vaccine and advent of the recession will continue degree of uncertainty is observed in global medicines, the world will continue to trend economy. In 2020, many exogenous towards social distance and introduction of until at least 2021. The unpredictable factors, including pandemic, selective lockdown measures, with regular economy will fall steadily. closure of borders, collapse in oil prices, tightening upon deterioration of the situation and overlapped each other in a way that it is difficult increase in incidence, which in turn will affect the During this time, structural to determine pandemic trajectory and its impact timing of economic recovery. on the economy of Kazakhstan. problems will accumulate that will deepen the crisis after the Alternative scenario for economic creation of vaccine. recovery According to survey, regarding the expectations on the second, most probable, scenario of Kairat Mynbayev economic recovery within the next 2 years, 83% experts' opinions were equally divided between